Mid-Morning Look: June 06, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look
Wednesday, June 6, 2018

U.S. equities mostly higher, with financials leading the S&P and Dow Industrials higher after underperformance the last few days, while the tech heavy Nasdaq Composite traded to another fresh intraday record high (before paring gains) after closing at a new high yesterday for a 2nd straight day, while the Russell 2000 Small Cap index also traded to new record levels. Insurance stocks come under pressure late morning on reports AMZN may look to sell home insurance. Transports mixed as airlines fall on lower guidance from DAL, while truckers rally. Solar stocks fall for a 3rd straight day as analyst bearish following recent policy developments in China that are likely to put pressure on margins past 2019. The Dow Industrial Average less than 100 points from the 25,000 level, while the S&P 500 bounces back above the 2,750 level. Reports that Treasury Secretary Steven Mnuchin reportedly urged President Donald Trump to exempt Canada from metals tariffs at a meeting Tuesday helping sentiment. The dollar and bonds slide along with a decline in oil prices following bearish inventory data.


Treasuries, Currencies and Commodities

· In currency markets, the dollar swings back lower in up and down action thus far this week; the dollar index (DXY) back down around the 93.50 level (-0.4%) despite positive economic data and rising rate hike expectations ahead of the FOMC meeting next week; the euro rising near 1.18, while the Pound back above 1.34 and the Canada dollar rebounds

· Precious metals rising with broader commodity space, as gold prices trade above $1,305 an ounce. Oil futures active following weekly inventory data

· Energy futures slipped on mixed inventory data: the API reported a -2M barrel drawdown in the latest week, thought the EIA reported a surprise inventory build of 2M barrels (vs. est. -2.1M), with Cushing stockpiles up 955K; gasoline also bigger build of 4.6M barrels vs. est. 500K build

· Treasury markets slipped as yields advance after remarks from European Central Bank senior officials showed the central bank remained on track to debate next week the timetable for ending its asset purchases; the 10-yr yield climbs 4 bps above 2.96%. ECB chief economist Peter Praet confirmed the central bank would discuss the eventual wind-down of its monthly bond buying in next week’s meeting.


Economic Data

· Nonfarm productivity rose 0.4%, missing the 0.6% estimate as output (goods and services produced) climbed 2.7% instead of 2.8%; hours worked were revised to show a 2.3% gain vs. a preliminary 2.1%; Unit-labor costs, rose by 2.9%, a bit higher than the preliminary 2.7% estimate

· U.S. trade deficit falls to 7-month low as exports set fresh record; The U.S. trade deficit shrank (-2.1%) in April (before the Trump tariffs took effect) to (-$46.2B) from a revised (-$47.2B) in March, and below the (-$49.0B) estimate; Exports edged up 0.3% to a record $211.2B


Sector Movers Today

· Transports; truckers get a lift early as CVTI gave 2Q18 EPS guidance of 45c-53c, above 38c estimate saying the truckload freight environment has been favorable, leading to operating results exceeding expectations (truckers CHRW, JBHT, LSTR); airlines negative news as DAL cuts its Q2 EPS view to $1.65-$1.75 (form prior $1.80-$2.00, below $1.88 estimate saying fuel costs at high end of guidance (AAL, UAL, JBLU, LUV move in sympathy)

· Optical stocks active after late day report from Reuters yesterday that the Trump administration is putting the finishing touches on a deal with ZTE Corp. that would allow the Chinese telecom-equipment maker to resume purchases from its American suppliers (shares of optical companies ACIA, AAOI, LITE, OCRL among those active on report – gets revs from ZTE)

· Defense Stocks (BA, LMT, NOC, GD) active after the Senate released the text of $716B defense authorization bill for FY 2019. The Senate Appropriations Defense Subcommittee held a closed hearing today at 10am to review defense innovation and research funding

· Semiconductors; AMBA shares fell after guidance for next quarter missed estimates, while Oppenheimer downgraded shares as declining revenue from wearables and drones compressed FY19 revenue and margin outlook; NVDA CEO said during reporter roundtable that it will be “a long time” before the next gaming GPU announcement; AMD with update at Computex in Taiwan last night as analysts positive on presentation

 

       Stock GAINERS

· AXON +140%; after Oxford BioMedica plc said it has entered an $842.5 million licensing agreement for OXB-102, a gene therapy treatment for Parkinson’s disease

· CVTI +1%; gave 2Q18 EPS guidance of 45c-53c, above 38c estimate saying the truckload freight environment has been favorable, leading to operating results exceeding expectations

· DVN +6%; as agrees to sell its ownership interests in ENLK and ELNC to an affiliate of fund manager Global Infrastructure Partners for $3.13B

· SIG +17%; as Q1 EPS with surprise profit vs. est. 7c loss on better sales, while comps declined less (-0.1%) vs. the (-4%) estimate

· TSLA +5%; after CEO Elon musk said the company will “quite likely” meet its goal of making 5,000 Model 3 cars in a single week by the end of the month

· VBLT +26%; as data shows MOSPD2 is needed for directional movement of tumor cells and some immune cells

· X +1%; announced this evening their decision to restart the second of two blast furnaces, blast furnace A, at its Granite City Works facility in Illinois/KeyBanc says view X’s decision to restart more capacity as very accretive to FCF


Stock LAGGARDS

· ALL -1%; after the Information reported AMZN is said to consider offering home insurance (shares of PGR, TRV, CB, ALL came under pressure) https://bit.ly/2xMY9bU

· AMBA -12%; guidance for next quarter missed estimates, while Oppenheimer downgraded shares as declining revenue from wearables and drones compressed FY19 revenue and margin outlook

· BF/B –3%; mixed Q4 results as EPS beat by a penny, while revs of $733M missed estimates and guidance mid-point missed estimates ($1.75-$1.85 vs. est. $1.82)

· DAL -2%; cuts its Q2 EPS view to $1.65-$1.75 (form prior $1.80-$2.00, below $1.88 estimate saying fuel costs at high end of guidance

· FB -1%; said it had data-sharing partnerships with four Chinese consumer-device makers, including Huawei Technologies Co.

· FSLR -8%; third day in a row for weakness in solar sector, this time JMP Securities cuts FSLR rating citing recent policy developments in China that are likely to put pressure on margins past 2019

 

Market commentary provided by Hammerstone Markets, a division The Hammerstone Group, a firm separate from and not affiliated with Regal Securities L.P.  Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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